Lenders have left their mortgage rates unchanged from last week ahead of the Bank of England’s interest rate decision, but first-time buyers can still get a deal as low as 3.76%, depending on the size of their deposit.
The average rate for a two-year fixed mortgage stands at 4.80%, while five-year fixed deals average 5.01%, according to data from Uswitch.
The Bank of England has kept interest rates at 4.25% amid inflation fears, delivering a blow to homeowners who were expecting a relief in their mortgage. The primary inflation measure, the Consumer Price Index (CPI), stood at 3.6% in the 12 months to June, well above the BoE’s 2% target.
However, it is widely expected to cut interest rates to 4% at its next meeting, on August 7.
Chancellor Rachel Reeves announced new plans, under which renters who have a good track record of monthly payments will be able to use this to prove to lenders how much they can afford to borrow, sometimes without the need for a deposit.
Homeowners are set to benefit from simplified mortgage rules, as the Financial Conduct Authority (FCA) confirms changes designed to make remortgaging or reducing loan terms easier.
A key part of the reform involves the FCA removing existing guidance that it deems to have “served its purpose,” a move intended to reduce the regulatory burden on financial firms.
This adjustment means borrowers could find it simpler to shorten their mortgage term, potentially lowering the total cost of borrowing and mitigating the risk of repayments extending into retirement.
Crucially, the requirement for a full affordability assessment will be lifted when a borrower seeks to reduce their mortgage term.
Consumers could see their choice improved by allowing for simpler affordability assessments, where a proposed remortgage is on similar terms to an existing contract, but more affordable than a new deal indicated by a customer’s existing lender.
Paul Matthews, senior director of risk at financial services consultancy Broadstone, said: “The FCA is taking significant steps to make it easier for consumers to make changes to their mortgages and get better support on their available options.
“The easing of regulation will allow lenders greater flexibility to innovate in the market.”
Reeves will also launch a permanent mortgage guarantee scheme to help more people get on the housing ladder.
The BoE also loosened its lending rules. Until now, just under 10% of new mortgages issued are for valuations exceeding 4.5 times a borrower’s income. That is now set to rise to 15% across the industry, with some building societies and banks now able to offer an even higher number of new mortgages at that level.
BoE estimates suggest 36,000 extra mortgages with higher loan-to-income ratios could be handed out each year as a result of the change.
Nationwide (NBS.L), Britain’s biggest building society, has also cut the salary requirements for first-time buyers from £35,000 to £30,000, in a move it hopes will enable 10,000 more people to become homeowners.
HSBC mortgage deals
HSBC (HSBA.L) has a 3.94% rate for a five-year deal, unchanged from last week. For those with a Premier Standard account with the lender, this rate is 3.91%.
Looking at the two-year options, the lowest rate is 3.82% with a £999 fee, the same as before.
Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit.
HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. However, the rates are much higher, with a two-year fix at 4.99% or 4.79% for a five-year fix.
This is because their financial situation and deposit size determine the rate someone can get. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky.
NatWest mortgage deals
NatWest’s (NWG.L) five-year deal is 3.90% with a £1,495 fee, unchanged from last week.
The cheapest two-year fixed deal is 3.81%, again untouched from the previous week’s deal. In both cases, you’ll need at least a 40% deposit to qualify for the rates.
Santander mortgage deals
At Santander (BNC.L), a five-year fix comes in at 4.01% for first-time buyers, which is unchanged from the previous week. It has a £999 fee, assuming a 40% deposit.
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For a two-year deal, customers can secure a 3.84% offer, with the same £999 fee, again the same as before.
Barclays mortgage deals
Barclays (BARC.L) was the first among major lenders to bring back under-4% deals and has since pushed deeper into under-4% territory,. Its five-year fix this week stands at 3.91%, unchanged from before
The lowest for two-year mortgage deals is 3.76% or 3.75% if you have a Premier exclusive account. Either way, the deals are deep into sub-4% territory.
Other rates at the lender include:
- 3.76% 2 Yr Fixed £899 product fee, 60% LTV, Min loan £5k, Max loan £2m
- 4.03% 2 Yr Fixed £0 product fee, 60% LTV, Min loan £5k, Max loan £2m
- 3.92%Premier 2 Yr Fixed £899 product fee, 75% LTV, Min loan £5k, Max loan £2m
- 3.93% 2 Yr Fixed £899 product fee, 75% LTV, Min loan £5k, Max loan £2m
- 4.15% 2 Yr Fixed £0 product fee, 75% LTV, Min loan £5k, Max loan £2m
- 4.02% 3 Yr Fixed £0 product fee, 60% LTV, Min loan £5k, Max loan £2m
- 4.07% 3 Yr Fixed £899 product fee, 75% LTV, Min loan £5k, Max loan £2m
- 3.90% Premier 5 Yr Fixed £899 product fee, 60% LTV, Min loan £5k, Max loan £2m
- 3.91% 5 Yr Fixed £899 product fee, 60% LTV, Min loan £5k, Max loan £2m
- 3.99% 5 Yr Fixed £0 product fee, 60% LTV, Min loan £5k, Max loan £2m
- 4.03% 5 Yr Fixed £899 product fee, 75% LTV, Min loan £5k, Max loan £2m
- 4.14% 5 Yr Fixed £0 product fee, 75% LTV, Min loan £5k, Max loan £2m
Barclays recently launched a mortgage proposition to help new and existing customers access larger loans when purchasing a home. The initiative, known as Mortgage Boost, enables family members or friends to effectively “boost” the amount that can be borrowed toward a property without needing to lend or gift money directly or provide a larger deposit.
Under the scheme, a borrower’s eligibility for a mortgage can increase significantly by including a family member or friend on the application. For example, an individual with a £37,500 annual income and a £30,000 deposit might traditionally be able to borrow up to £168,375, enabling them to purchase a home priced at around £198,375.
However, with Mortgage Boost, the total borrowing potential can rise substantially if a second person, such as a parent, joins the application. In this case, if the second applicant also earns £37,500 a year, the combined income could push the borrowing limit to £270,000, enabling the buyer to afford a home worth up to £300,000.
Nationwide mortgage deals
Nationwide’s (NBS.L) lowest mortgage rate for first-time buyers is 4.14% for a five-year fix. First-time buyers are looking at 3.94% for a two-year fix. Both deals rare unchanged from the previous week, require a 40% deposit and come with a £1,499 fee.
Eligible first-time buyers can apply for a mortgage with a £30,000 salary, down from £35,000, and joint applicants with a £50,000 combined salary, down from £55,000. This is expected to support an additional 10,000 first-time buyers each year.
Nationwide, which lent to more first-time buyers in 2024 than any other lender, has confirmed it has applied to the Prudential Regulation Authority to increase its high loan-to-income lending capacity.
The vast majority of Nationwide’s high LTI lending is done through its Helping Hand, which allows eligible first-time buyers to borrow up to six times income. This enables borrowing of up to 33% more than standard lending. Helping Hand has helped around 60,000 first-time buyers since launching in 2021.
The lender has also adjusted its mortgage affordability calculation by reducing stress rates by 0.75 and 1.25 percentage points, helping applicants borrow more, whether buying a first home, moving, or remortgaging.
Applicants can borrow, on average, £28,000 more; however, in some remortgage cases, customers could borrow up to £42,600 more.
Nationwide also reduced its standard stress rate and the rate applied to eligible first-time buyers and home movers fixing their deal for at least five years.
Halifax mortgage deals
Halifax, the UK’s biggest mortgage lender, offers a five-year rate of 3.94% (also 60% LTV), lower than last week’s 3.97%.
The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate deal at 3.79%, with a £999 fee for first-time buyers, lower than the previous 3.84%.
It also offers a 10-year deal with a mortgage rate of 4.78%.
Halifax has enhanced its five-year fixed mortgage products by increasing borrowing capacity. This improvement allows borrowers to access up to £38,000 more, enabling them to secure larger mortgages based on individual incomes.
Rachel Springall, finance expert at Moneyfacts, said: “The flourishing choice of low-deposit mortgages will no doubt be welcomed by borrowers looking to remortgage or are a first-time buyer.
“The government has been clear that it wants lenders to do more to boost UK growth, and so a rise in product availability for aspiring homeowners is a healthy step in the right direction.”
Cheapest mortgage deal on the market
Barclays has some of the lowest rates on the market, with a two-year fix coming in at 3.76%. NatWest takes the crown for a five-year fix with its 3.90% deal. However both require a hefty 40% deposit.
The average UK house price is £297,781, so a 40% deposit equals about £120,000.
A growing number of homeowners in the UK are opting for 35-year or longer mortgage terms, with a significant rise in older borrowers stretching their repayment periods well into their 70s.
Lender April Mortgages offers buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, from a deposit of 5%. Both those buying alone and those buying with others can apply for the mortgage.
As part of the independent Dutch asset manager DMFCO, the company offers interest rates starting at 5.20% and an application fee of £195.
Skipton Building Society has also said it would allow first-time buyers to borrow up to 5.5 times their income to help more borrowers get on the housing ladder.
Leeds Building Society is increasing the maximum amount that first-time buyers can potentially borrow as a multiple of their earnings with the launch of a new mortgage range. Aspiring homeowners with a minimum household income of £40,000 may now be able to borrow up to 5.5 times their earnings.
Mortgage holders and borrowers have faced record-high repayments in recent years, as the Bank of England’s base rate has been passed on by banks and building societies.
According to UK Finance, 1.3 million fixed mortgage deals are set to end in 2025. Many homeowners will hope the Bank of England acts quickly to cut rates more aggressively. At the same time, savers will likely root for rates to remain at or near their current levels.
Contact one of our highly experienced mortgage advisors today on 0121 500 6316 to discuss your mortgage needs.
